Auburn Hills, Mich., Apr 30, 2009  –  Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a vibrant new company. It will allow Chrysler and Fiat to fully optimize their respective manufacturing footprints and the global supplier base, while providing each with access to additional markets. Fiat powertrains and components will also be produced at Chrysler manufacturing sites.

“This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages,” said Bob Nardelli, Chairman and CEO of Chrysler. “It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles. Benefits to the new company include access to exciting products that complement our current portfolio, technology cooperation and stronger global distribution.”

Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Over the past several months, these discussions have evolved and expanded. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfillment of a broader strategic alliance.

“We want to personally assure everyone that the new company will produce and support quality vehicles under the Jeep®, Dodge and Chrysler brands as well as parts under the Mopar® brand. Chrysler employees will become employees of the new company. Chrysler dealerships remain open for business serving our customers. All vehicle warranties will be honored without interruption and consumers can continue to purchase our vehicles with complete confidence,” explained Nardelli.

Despite substantial progress on many fronts, Chrysler was not able to obtain the necessary concessions from all of its lenders, which would have avoided the need for a bankruptcy proceeding. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “

Chrysler also will file a motion under Section 363 of the Bankruptcy Code requesting the swift approval by the Court of the agreement with Fiat and the sale of Chrysler’s principal assets to the new company. The benefit of this type of filing is speed. It should allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability.

Nardelli, who has been leading Chrysler since August 2007, also announced to Chrysler LLC’s Board of Management and the U.S. Treasury his plan to leave the company following the emergence of the new company from Chapter 11 and the completion of the alliance with Fiat. He will return to Cerberus Capital Management LP as an advisor. “Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” said Nardelli. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”

During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of “business as usual.” The company will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers.

“To create this vibrant new company, we are using this structured bankruptcy to rapidly implement tough but necessary changes, including: the agreed upon wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers,” said Nardelli.

Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.

As part of the restructuring and with the backing of the U.S. Treasury, we have reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.

When the transaction is completed, the Voluntary Employee Beneficiary Association (VEBA) will own 55 percent of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 percent stake. Fiat will initially hold a 20 percent ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15 percent in three increments as it meets the following criteria: 5 percent for bringing a 40 mpg vehicle platform to Chrysler to be produced in the U.S.; 5 percent for providing a fuel-efficient engine family to be produced in the U.S. for use in Chrysler vehicles; and 5 percent for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles. Fiat cannot become a majority owner until after all U.S. government loans have been completely repaid.

As a part of the restructuring, most manufacturing operations will be temporarily idled effective Monday, May 4, 2009. Normal production schedules will resume when the transaction is completed, which is anticipated within 30 to 60 days.

“We want to recognize the Administration, the U.S. Treasury, President’s Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move this new company forward,” Nardelli said. “It is also important to acknowledge Cerberus and Daimler, which provided the foundation for the alliance as well as Chrysler’s many other stakeholders including the UAW and CAW leadership, employees, dealers and suppliers. Without their deep sacrifices, unstinting loyalty and enduring belief in Chrysler, the alliance would not have been possible. We look forward to our new partnership with Fiat. To be sure, there will be many changes as we move forward to implement our plans. But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company.”

TTAC commentator and contributor David Holzman writes:

Like just about everyone else whose car is at least four years old, my windshield (1999 Honda Accord) is pitted enough to make driving into the sun a real chore. What can I do about it, if anything?

I tried some glass polish from one of the big mail order car stuff places, in Wash. State I think. (I’m blanking on the name, but I used to get their catalog). Cost about $20, didn’t do squat.

BTW, Car Talk got this question in the last two years, said there wasn’t anything you could do. That’s hard for me to believe.

Read More >

Barack Obama is set to address the nation tomorrow, announcing Chrysler’s death and rebirth. The president will frame the government’s intervention in familiar terms: hope and change. Only in the reverse order: change and hope. Obama will say that the federal government is helping Chrysler transform into a viable American automaker. This we (yes we) are doing because President Obama has hope for the future of the American automaker and, not-so-incidentally, American automaking. Chrysler, the United Auto Workers (UAW) and Fiat will now build the kind of economical, environmentally friendly vehicles America needs. Unfortunately, Obama’s “plan” is the exact opposite of what it pretends to be.

Chrysler Bailout III represents the protection and perpetuation of the status quo, not genuine change. How could anyone think otherwise, now that The Presidential Task Force on Automobiles (PTFOA) has engineered a deal that gives the United Auto Workers a majority stake in the reconstituted Chrysler? If there’s any one group in the auto industry that has resisted change, that’s opposed root and branch reform, it’s the UAW.

Since the union’s inception, they’ve labored under an ever-expanding set of terms and conditions, that’s now thicker than “Gone with the Wind” and “War and Peace” combined. As you might imagine, none of these endlessly negotiated strictures, mandates, grievance procedures, benefits, entitlements, etc., were designed to engender manufacturing flexibility. They were designed to protect workers from change.

The UAW’s onerous contracts have bolstered a stultified corporate culture that’s both unable and unwilling to foster innovation. You want to change the way I do my job? Take it up with the union. And good luck with that.

Sure, Chrysler’s management bears ultimate responsibility for allowing their union workers to [help] frustrate the company’s overall competitiveness. And no, the UAW didn’t decide what Chrysler cars, trucks, SUVs and minivans to build, how to build them, what parts to use or how to put them together. But no matter who’s to blame for Chrysler’s execrable products, the union is in the business of protecting the union—not finding ways to build better automobiles.

Not to put too fine a point on it, anyone who truly believes that increasing the UAW’s stake in Chrysler will transform union members from legendary foot-draggers to world class sprinters, passing the four-wheeled baton to a freshly energized (Italian?) management structure with speed and grace, is nuts. As in delusional.

Which is a perfect description of President Obama’s “plan” for Chrysler.

Not to coin a phrase, Obama and his PTFOA have failed to hope but verify. It’s one thing to imagine a reborn Chrysler making fuel-efficient Fiats that can sell at enough of a profit to keep UAW members employed and pay off the new company’s $10 billion (and counting) debt to taxpayers. It’s another to think it can actually be done.

Chrysler’s turnaround “plan” involves more variables than a five day weather forecast, from mastering manufacturing logistics in a company decimated by layoffs, to somehow overcoming consumer resistance to TWO damaged brands.

Perhaps that’s why private investors wouldn’t touch Chrysler with a ten-foot spreadsheet. And now, where financial angels fear to tread, the federal government rushes in. To save jobs.  Union jobs.

As I’ve stated previously, the American public doesn’t know credit default swaps from Shinola (another company that went the way of the buggy whip). But they understand that new Chrysler is a union gig. Well, if they didn’t before, they will now, what with the UAW’s 55 percent share of the post C11 company. The question then becomes how much sympathy does the average American—rather than, say, the average Democratic operative—have for the “plight” of the unionized working man?

The answer: some. But not enough. Not enough to go out and buy a new new Chrysler product just because it wears the union label. Especially not now, at a time when the average new car buyer isn’t buying a new car. When they can’t afford to risk their hard-earned money on a vehicle that may or may not be reliable. From a dealer that may or may not be in business next year. And then there are the people who will not even consider buying a Chrysler product because of the bailout.

There’s your bottom line. At the end of the day, after the feds “invest” tens of billions of tax dollars in Cerberus and Daimler’s cast-off, the automaker will live or die based on whether or not American consumers will buy the company’s vehicles in sufficient quantity at a price that allows Chrysler to take in more than they spend. As our Best and Brightest will tell you, without genuine change in corporate culture, without a realistic plan, the odds of that happening are somewhere between none and none.

And so the president will eventually learn—as Chrysler’s previous owners have—that commercial realities can only be postponed not denied.

It’s been a while since we gazed into the crystal ball to see what’s beyond the horizon on the automotive landscape. A lot has happened in the intervening eighteen months or so: GM and Chrysler are closer to bankruptcy, Ford is the only American auto company likely to survive the decade relatively unscathed, the market for hybrids peaked then bottomed out as gas prices did the same, and the only thing flowing out of Washington, D.C., faster than bailout money is political BS.  Join us as we check the tarot cards to see where it’ll all lead. Here are the headlines of the future.

2010 Hyundai and Tata Enter NASCAR: Following Ford’s announcement that they’re joining Government Motors and Fiat-Chrysler in withdrawing from NASCAR, Hyundai and Tata have revealed plans to compete against Toyota. Hyundai spokesman Kim “Bubba” Chun-Joon confirmed the company’s intention to fund three teams. Chun-Joon says Hundai’s ready. “Our front-engine, rear drive two door Genesis Coupe is closer in configuration to the NASCAR ‘Car of Whenever’ than the front-drive, four-cylinder four-door sedans they’ve been trying to pass them off as.” Tata Motors is raising eyebrows with their plans to race 850hp pushrod V8 racers labeled as Nanos. “Yes, it is a stretch,” said Tata director of motor sports, Samarjit Jaysukh Tata. “But it makes as much sense as labeling them Impalas or Chargers. Besides, our research shows that southern males love big Tatas, and these are the biggest ones we can give them.”

2011 American Leyland Volt Goes on Sale: After numerous delays and teething problems, American Leyland is finally offering the plug-in hybrid Volt for sale. Thanks to improved technology, the final version can travel an astounding 125 miles without using a drop of gas. “Once we ditched the gas engine, the subsequent weight savings really improved the Volt’s mileage,” claims chief engineer Reddy Kilowatz. AL is not concerned about the modified vehicle’s range or recharge time. The company’s Commissar points to studies showing that the average buyer in its target market—gated retirement communities— travels fewer than 125 miles per year. “Anyone who needs more range can buy the gas-engine-only version, the Cruze.”

2011 – Chrysler’s UAW Members Threaten Strike Over Health Care Payments – The United Auto Workers (UAW) have voted to go on strike next Thursday unless they meet their own demands to abandon a proposed 25 percent increase in health care co-pays. “We understand the financial pressures we’re under to become a profitable automaker, but we completely reject our own decision to raise these fees,” a union leader said, under condition of anonymity. “It’s entirely unreasonable for us to ask ourselves to make greater sacrifices when our members have already given so much to themselves already.”

2012 NHTSA bans Driving – The National Highway Safety Administration (NHTSA) has banned private vehicles from America’s roads. “The EPA has ruled CO2 a deadly gas,” NHTSA chief Charles Hurley wrote in an official statement. “Public safety demands that we remove the single largest producer of this gas (after all the rest). This move will have a dramatic impact on fatal automobile accidents and will finally remove the threat of drunk driving from America’s roads.” In a press conference later that day, President Obama pointed out that the NHTSA ban only applies to driving. Consumers are still free to buy, own and pay taxes on their cars. “We don’t expect this move to have any immediate impact on production at American Leyland,” Obama reassured. The president promised to increase federal spending on public transportation, which is exempt from the ban. “Getting on the bus is not just the right thing for motorists to do, it’s now the only thing they can do.”

2014 Last Car Magazine Standing – Proctor & Gamble has acquired AutoCar and Track Trend magazine, the last auto-related print magazine in publication. P&G assured readers that the magazine’s content would remain untouched.  “We don’t care what they write; their content is already 89 percent advertising, anyway,” stated Charmin division spokesman Hugh Jass. “Our research showed the only place anyone reads it is in the bathroom. That made it a natural fit into our product line, so beginning with the July edition AC&TT magazine will be printed on rolls of Charmin UltraStrong tissue. Not only will this decrease the amount of old magazines clogging our landfills, husbands won’t have to listen to their wives complaining about magazines cluttering up the bathroom.” Reliable sources tell us that P&G is also negotiating with Sports Illustrated to produce a limited edition “Swimsuit Edition” Charmin MegaRoll.

This is not what I expected. Sure, I got the bankruptcy bit right. Big deal. Better analysts than me were making that call back when I was playing with Corgi toys (another car company destined for the scrap heap). But I never thought Uncle Sam would nationalize GM. Ace commentator PCH101 will tell you it’s all in good fun: a temporary government intervention that gives taxpayers a shot at recovering some of the tens of billions [we shouldn’t have] spent keeping the zombie automaker alive. Or at least postpones GM’s inevitable dissolution for a less financially fraught finale. But I reckon politics will rear its ugly head, create a distortion field around GM’s car making business and kill any hope of GM surviving in any way, shape or form. The acid test: the Chevy Volt.

Clearly, the Volt is a born loser. For one thing, it’s too late. If GM’s electric/gas plug-in hybrid had appeared ten years ago, before the Toyota Prius created and satiated the market for econo-hybrids, the Volt might have had a chance. Second, it’s born under a bad sign: bankruptcy. Third, it’s arriving (if it ever arrives) at the wrong time. With the economy in the doldrums, gas prices in Davy Jones’ locker and new car prices about to tank (thanks to GM’s aforementioned C11), a relatively cramped $30K high mileage sedan boasting untested technology that requires consumer behavior modification (i.e., plugging it in) is, well, doomed. Which reminds me: the Volt doesn’t work.

The undaunted cheerleaders over at Autoblog (AB) posted a behind-the-wheel test of GM’s “plug-in savior.” Click on the video and you learn that the EV boosters were treated to an “80 percent plus representation of what [the Volt buyer’s] electric vehicle driving experience will be in the Chevy Volt.” The test—such as it wasn’t— completely missed the point. It’s not the “experience” that counts. It’s the utility. Can the Chevrolet Volt drive a full 40 miles on battery power only? Uphill? Upwind? In an arctic chill? In the desert heat? How long does it take to recharge? And how does it drive on gas power AFTER the battery discharges? GM’s Volt man proudly proclaims The General’s about to build 75 Volt prototypes. Big friggin’ deal. Show us the practicality. Now.

Better yet, don’t. There is no business case for this car. In fact, the Volt is a near-perfect representation of the kind of half-baked, reality-divorced, over-optimistic product development that drove the artist formerly known as the world’s largest automaker into Uncle Sam’s loving embrace. It’s a Hail Mary from a company that doesn’t have a prayer of dislodging the Toyota Prius from its stranglehold on environmentally conscious, financially frugal car drivers. Never mind the Volt’s plug-in aspect. ToMoCo is already working on a plug-in Prius. If the Volt proves that power cords are pistonhead paradise, the Prius will have one. AND it will work.

Did I mention the Honda Insight? By the time the Chevy Volt gets around to getting around (for real), the Insight will have mopped-up the few thousand American consumers who want a Prius, but prefer someone else’s version. Lest we forget, GM has been producing knock-offs that singularly fail to knock the competition off their sales perch for the last thirty years or more. Be they economy, muscle or luxury cars. Truth be told, in the last two decades (at least), GM’s only consistently competitive, consistently profitable vehicles have been trucks and SUVs. Uh-oh . . .

Common sense says whatever’s left of GM after bankruptcy needs to make as much money as possible to pay us back. To stop sucking-up billions of our hard-earned tax dollars to provide work for union workers, management idiots and federal bureaucrats. The American automaker openly, brazenly admits that they’re not going to make money on the Volt for a long time. [See video above.] An indeterminate amount of time, in fact. Meanwhile, the Volt will require further billions to [maybe] make its technology work. And then tens of millions more to market the damn thing.

So kill it.

If the goal is to return to profitability, post-C11 “good” GM should focus on building the most profitable vehicles left in their arsenal. Then they should pick a couple of vehicles that have the most potential to be profitable and figure out how to make them profitable. There’s no way that niche products can pass this stress test. CTS Sports Wagon? Dead. Chevrolet Volt. Gone.

Of course, a return to profitability is no longer GM’s goal. Since when does the US government care about profitability? Have you looked at the federal deficit lately? When President Obama outlined his reasons for rescuing Detroit, it was all about green jobs and a healthy planet. Not profits or ROI. Which means the Volt will not die. But GM will.

Once upon a time, two Jeep Gladiators were built at the great big Jeep factory in Toledo, Ohio. One Gladiator was white, and the other was green. Gladiators were built to be the toughest trucks in the whole world. They could outwork any other pickup. And outlast them too. And for thirty some years, the white and green Gladiators worked and worked, doing all sorts of really hard jobs. Then one day, a couple of years ago, the white Gladiator said to the green Gladiator “I don’t need to do this hard work anymore. I’ve figured out an easier way to make a living!” Read More >

GMAC is a bank. It used to be a lender to both the car and mortgage industries. And not a particularly good one. Or, maybe, too good. Or just right if you were a sub-prime borrower looking for quick cash. GM owned all of GMAC, which was a cash cow. Right until it wasn’t. Just before the now-infamous sub-prime meltdown, GM was trying to cover-up its cash burn. So CEO Rick Wagoner sold a controlling share in GMAC to Cerberus, the same people who bought Chrysler. Flash forward to the waning hours of 2008. GMAC was about to fall into bankruptcy, dragging down Cerberus, Chrysler, GM and that funny-looking guy who used to be your landlord. So Uncle Sam stepped in—and how. The Fed relaxed its banking rules so that GMAC could become a bank, and, thus, hoover-up $6 billion worth of bailout bucks. After that, there’s some stuff about ending leasing, not lending money to car buyers, driving Chrysler and GM dealerships into C11, lending money to car buyers, etc. Up to speed? OK. So here’s the New Deal . . .

To facilitate its plans to turn Chrysler into a union co-op, the Presidential Task Force on Automobiles (PTFOA) wants to unload Chrysler Financial on someone. But who in their right mind would take ownership of Chrysler Financial NOW, when the automaker it supports is about to be turned into a union co-op (see: above) and married (con fucile) to an ailing Italian automaker? In the middle of a contracting new car market? That’s abandoning Chrysler in droves.

Actually, it’s worse than that.

Chrysler Financial is running out of money and has had to rely on $1.5 billion in loans from the federal government. The company also has a line of credit from several major banks, but the interest rate is so high that it cannot use the money profitably.

Furthermore, if Chrysler files for bankruptcy, a prospect that many officials say is highly likely this week, the banks can pull their lines of credit from Chrysler Financial.

Bottom line: no one wants this turkey, obviously. Except anyone who wants Chrysler to survive as a going concern, in one form or another. (Don’t look at me.) Make no mistake: if Chrysler Financial flames out, it will take the automaker down with it. Well, unless Uncle Sam comes to the rescue again.

Chrysler Financial afloat still remains critical to the company’s future, some industry and government officials said. A collapse of the financing arm could take down many dealers, which rely on short-term loans to buy the cars that sit on their lots. Chrysler sales could also grind to a halt as consumers struggle to get car loans. In the present environment, it would be difficult for dealers and customers to get financing from banks.

Luckily, the PTFOA has an idea. A wonderful, awful idea! Sell Chrysler Financial to GMAC. Hey, that was Cerberus’ plan all along, right? Combine GMAC with Chrysler Financial and strip and flip the rest? So, let’s do it! I said, let’s do it. And don’t worry: we got money. Or, more specifically, you got money. Which we gave you.

As Mr. Marley used to sing, four o’clock, roadblock. Now that GMAC is a bank, it falls under the purview of the Federal Deposit Insurance Corporation (FDIC), whose sworn task is to keep banks from doing really stupid things like . . . spending money it doesn’t have buying Chrysler FInancial (again ALSO owned by Cerberus). And the Fed, so forgiving and understanding back in late ’08, aren’t playing ball on this one.

Treasury officials have not yet obtained the agreement of the Federal Deposit Insurance Corp. and the Federal Reserve, sources said. The FDIC, created to backstop the banking industry, is balking out of concern that its resources would be drained in support of an auto manufacturer. And the Fed, which regulates banks, would need to grant a waiver from a long-standing rule that separates banking and commerce.

House of cards anyone? Or should I simply say, let the political arm twisting begin! I mean, continue. And I’m glad that PTFOA head Steve Rattner is a former investment banker, ’cause this one sounds like a real bitch to sew together.

Closing a merger between GMAC and Chrysler Financial would require an infusion of new bailout money from the Treasury. The company also needs access to an FDIC program that allows companies to borrow money at lower interest rates, sources said. And administration officials want the Fed to relax a rule that would restrict the amount of loans that the enlarged GMAC could make to Chrysler’s customers and dealers because both firms are owned in part by the same company, Cerberus Capital Management.

Not to be too much of a downer here, but this clusterfuck illustrates the fact that no matter how this shakes out, Detroit’s federal bailout is doomed to an extremely expensive failure. On our dime. Sigh. Chapter 7 would have been such a clean resolution . . . .

Reid writes:

My 1995 Lexus LS 400 needed a replacement computer to fix a known drivability problem related to the car’s throttle position sensor (TPS). Ever since I got the computer back, my car dies at low idle. I’ve reproduced it with the AC on, turning the AC off and then coming to a stop: it almost always stalls from its low idle.

When I originally had the computer checked out at a Lexus dealership, they said I might need to adjust the TPS after installing the new computer. I imagine that is what is going on, especially since the original codes from the (now replaced) computer said it was the TPS and I replaced it with a new one. Do you know if TPS adjustment is an easy fix that my mechanic can do?

Read More >

Time’s up! GM has announced that 2010 will be Pontiac’s final year. No surprise to anyone who’s been reading the writing on the wall. But nevertheless a sign that those in charge of GM’s destiny are more interested in appearing to be doing something than in actually addressing the core weaknesses of the car manufacturer. Why is so much attention focused on GM’s brands? Because, like the CEO, they’re what outsiders can see and at least superficially understand. The real problems are both less visible and less easily comprehensible.

As some within GM have long recognized, a wide array of brands could be a major competitive advantage. When you have multiple brands to work with rather than just one or two, each brand can be tightly focused, and thus be more meaningful than a brand that must be all things to all people. GM didn’t prosper because it failed to provide each brand with distinctive, desirable cars. Instead, every brand attempted to be all things to all people. Why? Partly because distinctive products cost more to develop than badges alone, but also because each brand had its own dealers, and each dealer wanted one of everything.

Dealers’ desire was not irrational. Demand for different sorts of cars varies with gas prices, the economy, and fluctuating consumer tastes. Any dealer that wanted steady sales—a key goal for any business—wanted a diverse set of products to sell. This longstanding problem was finally addressed a few years ago, when Buick, Pontiac, and GMC were combined into a single channel. This should have freed up Buick and Pontiac to focus on specific groups of car buyers with finely tuned products.

Pontiac’s focus was to be enthusiasts—for real this time. Bob Lutz announced that every future Pontiac would be a rear-wheel-drive performance-oriented car. Three models, each with two or three body styles, would have been sufficient: the Solstice coupe and roadster, the large G8 sedan and (planned but canceled) wagon, and a smaller Alpha-based coupe, sedan, and (possibly) hatch. No other mainstream brand offers a compact rear-wheel drive sedan, or focuses so tightly on enthusiasts. An Alpha-based Pontiac could have been a big winner. Hopefully we’ll still see this car from Chevrolet. But it would have been better from a brand focused entirely on driver’s cars.

So, maybe GM had finally figured out how to realize Pontiac’s potential, only to have gas prices shoot up and then have the bottom fall out of the market. GM being GM, plans for performance-oriented cars were tabled not long after gas prices spiked. Unlike the strongest auto companies, GM has long had a habit of constantly second-guessing its plans and over-reacting to car market fluctuations. Of course, this time around GM had no choice: it’s out of cash. It might have finally muddled through to a solution, but too late.

And so Pontiac will die next year. Saturn, Hummer, and Saab will be gone even sooner. This doesn’t change one key fact: killing brands does not address GM’s historical inability to consistently create distinctive, desirable cars.

Limited resources have often been blamed for this inability. Supposedly GM split its product development and marketing funds too many ways. But if each product was viable, it should have been possible to gather the necessary funds for it, at least before the recent collapse. Funds were limited because of limited faith, both inside and outside GM, that proposed products would be profitable.

The root problem: senior executives at the top of the corporation continue to be involved in more product decisions than they can possibly make well. These senior executives cannot understand each product and market the way an empowered, dedicated product team could. And they lack the time to personally make all of the decisions that need to be made.

The visible consequences: a few great cars that received the undivided attention and logjam-breaking influence of senior executives, and a larger number of not-so-great ones that did not receive this attention and influence.

Two possible solutions: reduce product offerings to a number that senior management can personally attend to, or transfer decision-making authority for these products to multiple units lower in the organization. GM made feints at the latter strategy, most notably with the mid-nineties formation of cross-functional vehicle teams led by Vehicle Line Executives. But this decentralization was never complete, and with each crisis the organization backslid to its old ways.

Even with GM on the brink of bankruptcy, there’s still no sign that substantial changes are being made to the GM organization. They’ve replaced the CEO and they’re reducing the number of brands. This treats the symptoms rather than the disease. How this course of action generally turns out: the surgeon (wielding a cleaver in this case) cuts and cuts and cuts until the patient dies.

Excitement is an ephemeral phenomenon. As was Pontiac. It had its glorious day in the sunshine of the exciting sixties. Pontiac was like the polite, quiet middle child who ran away to California in the early sixties, became a huge star, crashed in 1970, and played the county fair nostalgia circuit ever since. In between repeated bouts in rehab. And now we’re here to pay our last respects.

Not only was Pontiac the “quiet” child in the GM household, it was also the unplanned “accidental” child. Created in 1926 as a minor lower priced “companion” to Oakland, one of GM’s original five car companies, Pontiac survived its mother’s death in the Depression. To save costs, GM’s President Alfred Sloan had Pontiac share a lengthened Chevrolet body and chassis as well as other major components. It became a tarted-up Chevy, and with Pontiac’s first straight-eight engine in 1933, a more powerful one. Thus badge-engineering was born.

In Sloan’s “a car for every pocketbook” dictum, Pontiac became the (realistic) aspiration for the Chevy driver of the thirties. Pontiac’s prices slotted in exactly between the most expensive Chevy range and the cheapest Oldsmobile.

But Sloan’s religiously hierarchical structure collapsed at the beginning of the Depression. And by the fifties, the divisions were all over each other. It was like a new twist to a professional wrestling tag team match: The GM Mid-Price Thee Stooges. And although the GM team made sure to make it look like they were also fighting with each other, it didn’t really matter, as long as the real competition was flattened. The competition’s contestants like Edsel and DeSoto were tossed out of the ring, permanently. Mercury, Dodge and Chrysler were left bloody. And it wasn’t ketchup either.

But Pontiac was the laggard of the GM team until 1959. That’s when it reinvented itself, started working out in earnest, grew a “wide track,” and let its (now dyed blonde) hair grow long. And overnight, it became the Star(Chief).

Instantly, Pontiac jumped to fourth place in US sales. The dreamy 1960 “Wide Track Pontiac” ads as rendered by Fitzpatrick and Kaufman are icons of the time when Americans were ready to fully embrace image, youthfulness, style, and most of all, excitement. Pontiac’s decade had arrived.

Unarguably the best styled cars of the sixties, Pontiac jumped to third place in 1962 and held that spot though the decade. It was a crushing blow to Chrysler’s Plymouth division, which had claimed that perch since the late twenties. And in doing so, Pontiac sucked Chevy right into the GM tag team spectacle. And before long, even Caddy would be in the ring too, fighting for the working-man’s attention (and suspension of disbelief).

But all during the sixties, Pontiac had the moves to keep the eyes on it. The first was the 1963 Grand Prix coupe. It had the exclusiveness and formal elegance of the Buick Riviera coupe, at about three-fourths the price.

But Pontiac really wowed the crowds with its 1964 GTO. Now here was something that hadn’t been seen before. Drop-kick the big 389 into the light, mid-size Tempest, along with suspension, tire, appearance and interior upgrades, and the affordable American enthusiast car reached its zenith. In this pre-BMW era of fossilized British roadsters, the GTO overwhelmingly had the best overall performance/dollar equation. Pontiac was BMW before BMW was cool (or available).

But like for so many stars of the sixties, the seventies were not kind to Pontiac. Its flabby beltline was clearly showing. What remaining life forces it could muster were all concentrated on one remaining move, the Trans Am. And even that became a bit of a joke after one too many times. Pontiac’s star had passed, and it tumbled out of the coveted number three spot.

Now its moves were reduced to pathetic little imitations of Chevrolet: Phoenix, Astre, Sunbird, J-2000, T-1000, etc. Having lost its mojo, Pontiac also began endless self-conscious attempts to capture the BMW cachet, like with the original 1973 Grand Am.

Oddly enough, Pontiac’s last-ditch BMW-caricatures enjoyed a brief revival of interest during the mid-eighties. But the crowd that was paying (not very much) was not exactly a highly coveted demographic. As in this uncharitable description of the stereotypical driver of a (red) Grand Am: “a nail manicurist who lives in a trailer with an unemployed (former wrestler?) boyfriend”. Pontiac had become the Wal-Mart BMW. Be careful what you wish for.

Despite a few desperate last-ditch twitches induced by steroids smuggled in from Australia, Pontiac was tossed out of the ring for good. And the once-invincible GM tag team is desperately looking for signs of life among its few bloodied remaining members.

I used to worry that TTAC was too negative. I’d publish “good” news to try and balance-out our no-holds-bared criticism of Motown’s follies. At some point, I gave up trying to find a silver lining. It wasn’t simply the fact that there wasn’t one. Or that the news coming from Detroit became undeniably dire. It was more of a personal “come to Satan” moment when I realized that making people happy wasn’t my first, best destiny. My job: tell the messy, pay-no-attention-to-the-logical-fallacy-behind-that-PR-curtain truth about cars. But there are times, like now, on the cusp of Chrysler’s C11 (or worse), when I wonder what good can come of all this. Will we ever look back on this time and think that the Motown bailout was, somehow, a good thing?

The people [currently] in charge of propping-up Chrysler and GM would have you believe the federal bailout is accomplishing/will accomplish three main objectives. First, it lessens/postpones the impact of the automakers’ failure on the wider U.S. economy. Second, it protects American jobs (same as No. 1, but who’s voting anyway?). Third, it helps usher in a new era of environmentally-friendly vehicles, creating “green jobs” as hydrogen fuel cells—I mean “the electrification of the automobile” begins.

Of these, only the first is remotely credible, or, if you’re an electric vehicle booster, relevant. And when I say remotely credible, I mean it in a completely theoretical way. After all, how can we really know what the impact of a “uncontrolled” Chrysler and GM collapse would have been without actually experiencing it?

Whether true or not, the proposition that an earlier, non-governmental Chrysler and GM chapter 11 would have unleashed The Great Depression II is hardly what you call compelling. As I’ve mentioned before, only someone suffering from OCD believes that the lack of catastrophe is incontrovertible proof that questionable preventive measures were fully justified.

In other words, if Chrysler and GM’s collapse HAD triggered economic Armageddon, Americans would not have begrudged them their money. As it didn’t, over 70 percent now say your mother and I agree: enough is enough, Mr. Motown. No more loans for you, son. Or, more accurately, you lying, money-sucking, house wrecking, uninvited whore.

The ongoing Detroit bailout bodes badly for the American voters’ relationship with their elected officials.

But what about the bank bailouts, apologists cry. Beyond investing the money people give them, banks are a mystery to most folks. The auto industry they understand. They “get” that Chrysler and GM put itself in this mess by making products people don’t want to buy and/or not standing behind them (the cars) when they broke. They’ve figured out that Chrysler and GM are not victims of circumstance. Otherwise Ford would also be bellying-up to the bailout buffet.

Clearly, voters aren’t happy about Detroit’s welfare checks. They will be even less happy with the next round. And even less happy with the round after that.

Barack Obama and his Presidential Task Force on Automobiles (PTFOA) think it can overcome the public’s growing anger and resentment by appealing to their “can-do” American optimism. Forget the old Chicken Little routine. The PTFOA will sell the “new” Chrysler and/or GM as the second coming on wheels. It’s a new dawn it’s a new day it’s a new life and you should be feeeeeeling good. ‘Cause we’ll always be together, together in electric dreams.

No one will buy it. Literally. If GM and Chrysler had gone through a non-governmental bankruptcy back when they should have, when the U.S. new car market was healthy enough (circa 2005), consumers would have played second life with the damaged Detroit duo. Now? Nope. Sales will tumble. More federal funds will follow. The fed-up factor will flourish. And that’s a good thing.

Think of it this way: the Detroit bailout will sour Americans on government “investment” in private enterprise. Again, AIG what? Credit default huh? But John Q. Public will surely grasp the message coming from Washington re: the “new” Chrysler and/or GM. Their tax money is supposed to lead to dramatically better cars. Better than the opposition’s. ‘Cause that’s how you make money, right? Of course, that won’t happen within this administration’s first term; if only because carmaking requires a three to five-year development cycle. Not to mention all the other reasons.

The PTFOA’s inability to resurrect the automakers’ fortunes will not go unnoticed. With every new cash infusion in “our” car company or companies, with every lost point of market share or red ink-laden financial quarter, Obama’s wider plans for federal interventionism will lose appeal.

Of course, some will see this “failure is possible” scenario as a bad thing. The exception that screws-up the long overdue rules that would lead to a more equitable society for the average working man and woman. But then I have little time or sympathy for that kind of negative thinking.

For the last decade or so, nostalgia has been big in the car biz. Does it work? If substance backs it up. To wit . . .

*  The MINI is a great drive.

*  The PT Cruiser is practical—easy to park yet plenty of hauling volume, especially if you remove the back seats.

*  The current Mustang has so much style it doesn’t need much substance, and it does have the muscle car thing going for it. (Fun fact: Mitt Romney drives a 2005. Chris Dodd was driving a late model ’stang until he started running for president. Then he traded it for an Escape Hybrid.)

*  The Miata is probably the best drive per dollar. It does that job so well that people often forget that it tips the ragtop to British roadsters of the mid-twentieth century.

* The New Microbus concept could have made minivans cool. I would have had trouble holding onto my wallet, and I’m a single guy. I want to drive it around America.

When it lacks substance, nostalgia doesn’t go very far . . .

*  The new T’bird was an expensive car that looked nice but didn’t do anything well.

*  The PT is an interesting styling concept, but a terrible execution. (Pokemon eyes on a retromobile???!) Good style doesn’t go stale, but the PT was stale almost out the door. It’s not a driver’s car and it’s not a reliable car. The original xB does everything better than the PT, and if you don’t care about cool, so does the Element. Another fatal mistake by the pentastar.

*  The Charger is a pale imitation of the original, as if some middle-schoolers tried to copy it with papier mâché, with a really mean face. The slit windows are annoyingly impractical on both the Charger and the Magnum.

*  Even the Camaro is weak in the styling department, for similar reasons, although the concept looked much better. Even if deus ex machina saves GM and the economy roars back, I predict mediocre sales.

Rule breaker . . .

*  The VW (Real) Beetle was a car that eschewed style for substance. It had so much practicality, from which it derived so much personality, that it became stylish. The New Beetle eschews substance for style. I’m not wild about it—too cutesy—but they did a really good job of cutesy, and a lot of people like that.

You can’t hang nostalgia on a name alone . . .

*  The “GTO” completely lacks the original’s panache. Imagine it next to the real thing. (G8 is a much better name for a Pontiac in this age of globalization. In fact, Pontiac should have had a top of the line G8, which they could have called the “Summit.” Then Larry Summers could have bought one.)

One reason we like retro is because it so often puts the “car” in charisma (or the other way around). Most of today’s vehicles have all the personality of a room air conditioner. But you can inject personality without invoking the past, if only the bean counters would get out of the way. Occasionally, they do . . .

*  The (real—gen 1) xB looks so cool that even my friend, Paul, a 53 year old family man with an aging Odyssey and an early ’00s Civic hatch with about 35,000 miles and a few dents that he calls his “pocket rocket,” whose life is far too interesting and successful for a midlife crisis, wants one. It’s also extremely practical; kind of a modern Old Beetle.

*  The original Saturn was another car that was cool without being retro, something that could happen because it was created outside of the usual GM channels. Too bad GM blew it.

*  The Acura Integra’s cool was a combination of major, yet inexpensive, fun, practicality, and better style than most anything on the road (even if it is still not nearly as stylish as, say, a Corvair).

*  The CRX was cheap, quick, agile, and honest.

*  The old, boxy Volvos look exactly like what they are, and they do their job well. (They are already becoming classics.)

*  The ’90s Caprices really look like they’re going to pull you over. I want to drive a black and white down the left lane and watch everybody get out of my way.

We wouldn’t need retro if there were more room for creativity in the big car companies. And we wouldn’t need it if all the once-great brands hadn’t completely lost touch with their heritage. Take Chevrolet. Through the mid-’60s, most of these were gorgeous pieces of commercial art. Despite the names of some of the modern models—Malibu, for instance—these cars bear little resemblance to and completely lack the artistry of their classical forebears. Of course, when even a Citroën looks like an appliance, you know the end of days is near.

The Turtle Wax junket was a learning experience for everyone involved. Look for a branding-minded editorial and a product review in the not-too-distant future. But for now, let’s answer the B&B’s questions about Turtle Wax. Surprisingly, the amount of controversy over their ICE lineup was enough to merit a separate section. As always, The Truth About Cars is here for you, so don’t be shy if you need more info than what I’ve provided.

Harleyflhxi: Will Turtle Wax be coming out with a product to compete with the “Mr. Clean” carwash system?

Sajeev Mehta (SM): Turtle Wax says the Mr. Clean system uses parts and chemicals that aren’t part of Turtle Wax’s core strategy. Turtle Wax also says the Mr. Clean system isn’t doing well in the market; Turtle Wax isn’t feeling any pressure to revise their product technology or strategy.

Schm: What would be the best method for eliminating water spots (without buying a buffer)? I own a black car (I’m a masochist) and I can never seem to get rid of them. Is there a Turtle Wax product that can help me? I own a microfiber towel, and always dab dry; I just can’t seem to get rid of water spots. And I don’t want to spend a fortune.

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Britain’s recently presented budget contains a new vehicle scrappage incentive, making Old Blighty the final major European economy to jump on the alleged “green stimulus” bandwagon. Thirteen other European nations, including France, Germany, Italy, Spain and Poland, have introduced similar measures, which provide government incentives to new car buyers who scrap an older vehicle. But will Britain’s new program (which offers up to $2,900 in incentives) have the same salutary effects on new car sales as France (March sales up 8 percent) and Germany’s (March new registrations up 40 percent)? Closer to home, how will the solidified Euro-consensus on scrappage schemes affect the chances of a similar program in the US? Although the programs have already been hailed as the savior of European new car-sales, these things don’t always translate well across different markets. Under a critical lens, issues with the latest British plan indicate a number of problems with bringing such a program stateside.

Britain’s plan to provide about $3K towards a new car purchase per 10-year-or-older scrapped vehicle seeks to limit the measure’s impact on an already-tight budget, likely in response to Germany’s massive oversubscription to the program. As our Bertel Schmitt has reported, what began as a €1.5 billion program has ballooned into a €5 billion expenditure. To limit this kind of cost overrun, the British plan (sensibly enough) limits the offer to “only” 300,000 purchases. But beyond the numerical limitation, the British government is also requiring the “auto industry” to provide half of the incentive, about $1,500 per car. Who will be responsible for providing the second half of this incentive (importers, retailers, manufacturers)? Still no word from Downing Street.

Commentators like The Telegraph‘s Mike Rutherford have expressed concerns as to whether the industry will actually step up with the extra $1,500. It’s safe to say that the industry’s  enthusiasm level likely won’t equal the government’s, which will see its modest outlay more than returned by new vehicle VAT receipts. Moving past the question of whether this is a $1,500 incentive not a $3K incentive, Rutherford isn’t alone in expressing serious doubt as to whether consumers will materially benefit from the measure.

A web-based auto retail manager defines part of the problem to Bloomberg: “The U.K. car market is entirely different to those on the continent in that buyers typically change their car after three years when the finance agreement and warranty expire.” Besides a possible shortage of older cars to be scrapped, there’s also an issue of new vehicle availability, as imports to the Isles have been cut in line with falling demand.

And, as Rutherford points out, many 10-year or older vehicles may be worth considerably more than even the manufacturer-matched full $3K (especially considering Britain is crawling with classic and near-classic car nuts). Even more troubling, the incentive could end up shrinking the massive incentives already offered by manufacturers on new cars. $7,000 incentives on Fords and 40 percent discounts on Opels could dry up in the face of government stimulus, actually creating worse conditions for new car buyers. Throw in the likelihood of a dramatic drop-off in sales when the stimulus runs out (assuming it functions as planned) and the devastating effects on newer used car prices and fleet values (estimated to wipe out nearly $9 billion in value nationwide) and the British plan appears fraught with potential problems, even having learned from the experiences of continental cash-for-clunker experiments.

Back in the states, there seems to be little doubt that some form of cash-for-clunker scrappage bill will become law. Reuters reports that Goldman Sachs is already upgrading FoMoCo’s rating on the twin assumptions that GM and Chrysler will enter bankruptcy and that a clunker bill will be passed. Two competing bills have already been introduced (Tom Harkin’s S.3737 and Betty Sutton’s H.R.1550) and industry lapdog John Dingell has promised to include a similar provision in the upcoming climate change bill. This despite warnings from Britain that clunker bills are extremely inefficient as an environmental measure at best, and could actually increase carbon emissions.

The major concern with a possible US clunker bill is the indication that only “domestically produced” vehicles would qualify for federal bob. Both Harkin and Sutton’s bills have some form of “Buy American” stipulations. Harkin’s is particularly protectionist, while Sutton’s includes vouchers for certain vehicles built in North America (although at lower levels than vehicles “manufactured in the US”). Dingell will certainly try his darndest to funnel voucher money directly to Detroit. Though these measures seek to mitigate a lack of manufacturing stimulus that has been a noted criticism of European scrappage bills, yet more unintended consequences await such provisions: namely challenges on free-trade terms from Canada and Europe.

But such measures will be necessary to ensure any benefit at all to the US industry, which has weaknesses in its small-car portfolio, where scrappage-stimulated sales have been boosted the most. Absent environmental and manufacturing benefits (assuming the US wants to avoid a nasty trade war), a scrappage bill will benefit only scrap yards and new-car dealers. And yet an overabundance of dealers is fundamental to the auto industry’s wider woes. Though Europe’s scrappage results look good on paper to a sales-starved US industry, the consequences don’t seem to outweigh the benefits.

Michael K writes:

I have 2008 Corolla with manual shifter. There is almost no engine braking power when I downshift. I know it’s not a malfunction (it’s how it’s designed), but I would like to understand why.

For example, when I’m approaching a red light and I downshift, the car barely slows down. Even if I downshift to even a lower gear to keep the RPMs high, there is still very little braking power provided by the engine. Or, going downhill and downshifting to keep the car’s speed stable without touching the brakes works only on small hills. On a steeper downhill the car continues accelerating. Of course, it’s not as bad as if the car was in neutral, but still…

Before this Corolla I had a 97 Suzuki Swift with manual. One of the cheapest cars on the road, but the braking power of the engine was good.

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